Tennessee Shareholders' Agreement between Two Shareholders of Closely Held Corporation with Buy Sell Provisions

• Category: Corporations - Shareholders and Stock
• State: Multi-State
• Control #: US-02569BG
• Format: Word; Rich Text

Description

A corporation whose shares are held by a single shareholder or a closely-knit group of shareholders (such as a family) is known as a close corporation. The shares of stock are not traded publicly. Many of these types of corporations are small firms that in the past would have been operated as a sole proprietorship or partnership, but have been incorporated in order to obtain the advantages of limited liability or a tax benefit or both. A buy-sell agreement is an agreement between the owners (shareholders) of a firm, defining their mutual obligations, privileges, protections, and rights. This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction. A Tennessee Shareholders' Agreement between Two Shareholders of a Closely Held Corporation with Buy Sell Provisions is a legally binding contract outlining the rights and obligations of the shareholders in such a corporation. This agreement is designed to provide clarity and guidance in various situations, including ownership changes, disputes, and the potential sale of shares. One of the main aspects of this agreement is the buy sell provisions. These provisions establish the terms and conditions under which a shareholder can sell their shares to the other shareholder or the corporation itself. This helps ensure a smooth transition of ownership and prevents disputes or conflicts between shareholders. The Tennessee Shareholders' Agreement may include different types of buy sell provisions, including: 1. Right of First Refusal: This provision grants the remaining shareholder(s) the right to purchase the shares of a selling shareholder before they can be sold to a third party. This gives existing shareholders the opportunity to maintain control of the closely held corporation. 2. Tag-Along Rights: This provision protects minority shareholders by allowing them to "tag along" and sell their shares alongside a majority shareholder who has received an offer to sell their shares. It ensures fair treatment and the ability to participate in any potential sale. 3. Drag-Along Rights: Conversely, this provision gives majority shareholders the power to compel minority shareholders to sell their shares alongside them in a sale to a third party. It enables the majority shareholders to have full control over the sale process. 4. Shotgun Provision: This provision is a mechanism to resolve disputes between shareholders. If one shareholder wishes to buy the other's shares or sell their own, they provide a price and terms. The other shareholder then has the option to either accept that offer or purchase the first shareholder's shares on the same terms. This provision incentivizes fair and reasonable offers. 5. Valuation Mechanism: To determine the price of the shares during a buy-sell arrangement, a valuation mechanism may be included in the agreement. This can be based on predetermined formulas, independent appraisals, or agreed-upon metrics. Other key elements that may be included in a Tennessee Shareholders' Agreement of this nature include voting rights, board representation, dividend policies, non-competition clauses, dispute resolution procedures, and governance mechanisms. By carefully considering the specific needs and circumstances of the closely held corporation, shareholders can customize the agreement to align with their goals and protect their interests. It is advisable to consult with legal professionals experienced in business law in Tennessee to ensure the agreement complies with state laws and addresses all necessary aspects for a solid foundation of shareholder relations.

A Tennessee Shareholders' Agreement between Two Shareholders of a Closely Held Corporation with Buy Sell Provisions is a legally binding contract outlining the rights and obligations of the shareholders in such a corporation. This agreement is designed to provide clarity and guidance in various situations, including ownership changes, disputes, and the potential sale of shares. One of the main aspects of this agreement is the buy sell provisions. These provisions establish the terms and conditions under which a shareholder can sell their shares to the other shareholder or the corporation itself. This helps ensure a smooth transition of ownership and prevents disputes or conflicts between shareholders. The Tennessee Shareholders' Agreement may include different types of buy sell provisions, including: 1. Right of First Refusal: This provision grants the remaining shareholder(s) the right to purchase the shares of a selling shareholder before they can be sold to a third party. This gives existing shareholders the opportunity to maintain control of the closely held corporation. 2. Tag-Along Rights: This provision protects minority shareholders by allowing them to "tag along" and sell their shares alongside a majority shareholder who has received an offer to sell their shares. It ensures fair treatment and the ability to participate in any potential sale. 3. Drag-Along Rights: Conversely, this provision gives majority shareholders the power to compel minority shareholders to sell their shares alongside them in a sale to a third party. It enables the majority shareholders to have full control over the sale process. 4. Shotgun Provision: This provision is a mechanism to resolve disputes between shareholders. If one shareholder wishes to buy the other's shares or sell their own, they provide a price and terms. The other shareholder then has the option to either accept that offer or purchase the first shareholder's shares on the same terms. This provision incentivizes fair and reasonable offers. 5. Valuation Mechanism: To determine the price of the shares during a buy-sell arrangement, a valuation mechanism may be included in the agreement. This can be based on predetermined formulas, independent appraisals, or agreed-upon metrics. Other key elements that may be included in a Tennessee Shareholders' Agreement of this nature include voting rights, board representation, dividend policies, non-competition clauses, dispute resolution procedures, and governance mechanisms. By carefully considering the specific needs and circumstances of the closely held corporation, shareholders can customize the agreement to align with their goals and protect their interests. It is advisable to consult with legal professionals experienced in business law in Tennessee to ensure the agreement complies with state laws and addresses all necessary aspects for a solid foundation of shareholder relations.